Understanding your region’s specific assets/strengths is key to building a value proposition that will attract foreign investors.
This toolkit is primarily focused on FDI attraction. However, a region needs to have a solid understanding of its overall assets for purposes of business attraction – foreign or domestic. Thus, determining your value proposition to foreign investors begins with a clear understanding of your general regional assets/strengths. (See section on what assets matter to foreign investors.) Also, in the Resources section below there are links to sources of data to identify important major regional sectors or clusters.
To specifically attract foreign investors, it is also critical to understand a region’s existing connections and relationships to foreign markets. This section discusses these foreign connection assets.
Assessing Foreign-connection Assets
Foreign connection assets include two categories:
- Existing Foreign Investment: Since up to 70 percent of new foreign investment is linked to the existing base of foreign investors (see UNCTAD, p. 8), it is critical to identify existing foreign-owned companies and the major country sources of foreign investment. Existing foreign investment is a source of business expansions, can generate leads with new investors, and can promote the region in their home markets.
- Connections to Foreign Markets, such as international partnerships (such as sister cities, or innovation and research collaborations with foreign entities, regions, or universities), concentrations of immigrants, foreign residents, foreign students and alumni from particular countries; proximity to particular countries (e.g., Canada or Mexico, or North Atlantic markets for New England); international organizations, such as foreign chambers of commerce or language schools; relationships with foreign sources of supply (importers or distributors that are owned or have strong connections with foreign suppliers); foreign countries or peer regions with similar clusters/sectoral concentrations and specializations. These existing relationship “assets” with specific foreign countries can facilitate or make it easier (or more comfortable) for an investor from that country to invest in your region.
How to Identify Regional Connection (Assets) to Specific Foreign Markets
|Step||Purpose||Sources of Data|
|1. Identify existing foreign-owned companies||This list should include:
|2. Identify connections and relationships with specific foreign markets||These assets or connections include:
Interviews / Meetings with Existing Foreign Owned Enterprises
Interviews with existing foreign-owned enterprises are extremely valuable sources of insights about the strengths of the region from the perspective of foreign investors. These meetings are also a valuable way to deepen relationships as part of a Business Retention and Expansion (BRE) or aftercare program. As Brookings noted in its FDI Planning Guide “…in many metro areas, the insights and information gained through the interview process proved to be just as valuable, if not more so, than current FDI data and in fact drove key findings and strategies in the majority of cases.” (p.9)
Ideally, you would meet with as many foreign companies as possible – on an ongoing basis – both to gather information and to build relationships. For purposes of gaining insights, there is particular value in speaking with a variety of companies from different industries and countries, as well as engaging greenfield or new-to-region companies and those that entered through acquisition.
Agenda for a Meeting or Interview with a Foreign Owned Enterprise
- Why did you select this region for investment?
- What were/are its key strengths?
- What were/are its weaknesses?
- What are the some of the challenges your business is facing?
- How can we help?
- Are you fully aware of some of the services we can bring to the table to help existing businesses grow? Export? Expand? Obtain technical assistance? Train your workforce? Etc?
- Are you growing?
- Do you have expansion plans you can share with us?
- How can we help?
- Can we enlist you to talk about the region when you travel overseas? Or to speak to potential investors at tradeshows?
- Can you point us to other companies – possibly suppliers or customers – that may benefit from being in this region? Or benefit from being near you?
Regional Profiles – Economic, Labor, Cluster/Sector
This toolkit is focused on attraction of FDI. However, as part of a regional assessment to develop a general business attraction strategy, including FDI, an EDO needs to be able to profile its economy, businesses, labor force, innovative capacity, and educational attainment. A particularly important element of these profiles is the ability to identify and assess important clusters and industries that: a) represent large numbers of companies and/or employment, or that represent a significant number of foreign investors; b) offer significant growth potential; c) have competitive strength or unique assets; d) are part of state target industries or clusters. (The regional assessment should also identify specific major companies and institutions, such as research institutions, that foreign investors would recognize and may bring value to a potential investor.)
Potential sources of information to profile regions or assess key sectors and clusters include the following:
The Harvard Cluster Mapping Project has excellent tools for profiling a regional economy, including clusters, economic performance, demographics, innovation, and workforce. The site divides the US into different economic regions, and those definitions may not be a good fit for your specific region. However, the site gives the user the ability to custom-define its own region (as a set of specific counties). The site’s cluster data is an excellent starting point, and leverages the efforts by the Harvard Cluster Mapping project to define clusters based on a series of inter-related 6-digit NAICS codes. It also relies to a great extent on location quotients to define regional specialization. Our research suggests that both NAICS codes and location quotients are limited in their ability to identify and assess clusters as regional assets. Many clusters are not well described by NAICS codes. And location quotients are a blunt instrument. For example, a small number of strong interconnected companies in a region may represent export and FDI potential, even if the location quotient is no greater than 1.0. A deeper understanding of the individual companies in the cluster is required to discern how they can be a regional asset for international engagement.
Statsamerica also provides tools for regional profiling. Some of the features that may be of particular relevance for international engagement strategies include the ability to develop profiles for counties or custom-defined groups of counties. The county profiling feature provides data on demographics, employment and labor force, wages, educational attainment, and other areas. The custom region builder includes information, for example, on cluster employment and location quotients, occupational clusters, and educational attainment. The site also has an Innovation Index for regions, which incorporates a wide variety of measures.
Census Bureau County Business Patterns offers a variety of county-level data on businesses by industry (NAICS codes) and size of company.
The Bureau of Labor Statistics provides data on employment and compensation by industry and occupation for regions, counties, and metropolitan areas.
North Carolina has a valuable example of a “heat map” used to highlight its global assets and connections to specific foreign markets. This map can be used to develop a strategy to target specific foreign markets for investment, as well as to market these “foreign connection assets” to potential investors. The map provides information (by county) on such parameters as percent change in foreign-born population, number of foreign-born residents by world region, languages spoken at home, enrollment in foreign language courses and degrees awarded in foreign languages, international students at North Carolina colleges, number of Sister Cities, import/export data, number of foreign-owned sites, and employees.
The Virginia Israel Advisory Board provides an example of a collaboration between a region (in this case the state level) and a specific foreign market. The relationships built through this initiative have led to FDI successes. Click here to read a case example.
Glossary of FDI terms used in reporting data
IERC Final Report:“International Engagement Ready Communities: Effective Practices & Determinants of Foreign Direct Investment & Export Success, Final Report”
National League of Cities Center for Research and Innovation:
- “Strategies for Globally Competitive Cities: Local Roles in Foreign Direct Investment and International Trade”
- “FDI planning guide: A blueprint for metro teams pursuing global economic engagement”
- San Diego Metropolitan Export Initiative—Market Assessment
- The Greater Portland Metro Export Strategy Survey—Survey Results
- GCI Export Market Assessment—Sample Business Interview Form
- GCI Export Market Assessment—Sample Business Survey